Profit-Taking Is Not a Sin

 | Oct 22, 2013 | 7:05 PM EDT
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Why shouldn't Carl Icahn sell half his Netflix (NFLX). The only thing odd would be if he didn't sell some Netflix. He is an entirely rational being unlike the momentum players. He doesn't want to give up a good gain and he nailed one. It's the same as Hain Celestial (HAIN). He nailed it and he got in at a great price and got out at a great price and he made a huge profit.

Does it mean Netflix is too high? Does it mean Hain is too high? No, it means Icahn is a disciplined investor who acts like the way investors used to before people felt compelled to ride a stock all the way up and all the way down.

One of the reasons why I hate momentum investing is because once a stock is anointed it never loses that anointing until it is too late. It's almost as if these managers who own these stocks somehow feel that they have to take them to their grave. They fear getting off more than they fear a top.

Icahn is not one of those investors. In this new world where you are held liable for everything you ever say the biggest sin is to tell people to sell some Apple (AAPL) at $500 on the way to $700 and for the next two hundred points you are in purgatory.

The same exact thing goes for Tesla (TSLA), Solar City (SCTY) and Amazon (AMZN). These are cult stocks and therefore battlegrounds. If you think that Solar City is going to lose all of those subsidies, then it is a disaster stock and you should take some off now. But here's how asymmetrical things are. I have been fascinated by Solar City and I have said that I can understand why people own the stock.

But if, tomorrow, I say that a double is enough and you should sell it and it goes up another ten I will be hated as if I told people to short it. All I would be doing is using the same "bulls make money, bears make money, pigs get slaughtered" logic that Icahn gave you. And nothing else.

Profit-taking is not a sin. Profit-losing after you have it is a sin. That's all there really is to it.

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